Shares of Figma (FIG +4.79%) were taking a dive last month as part of a broader pullback in software stocks amid ongoing fears of AI disruption, especially after Anthropic launched a competing product, Claude Design, in April.
Despite that decline, there was some positive analyst chatter for Figma, and the stock stabilized in the second half of June before gaining in the beginning of July.
According to data from S&P Global Market Intelligence, the stock finished the month down 29%. As you can see from the chart below, most of Figma's losses came in the first half of the month.
What happened with Figma
Figma has been public for nearly a year, and a breakout start after its IPO gave way to a crash on fears about its high valuation and then concerns about disruption from AI-native software.
Disappointing earnings reports from software companies, including Salesforce, Adobe, and Oracle, contributed to the sell-off in the first half of the month, in particular due to worries that seat-based software-as-a-service companies like Figma would lose subscriptions to AI alternatives.
There was little news out on Figma in the first half of the month, but the company has been seen as a poster child for the "SaaSpocalypse" as investors believe its design software is vulnerable to disruption, and some of its peers are seeing higher seat-based churn as AI alternatives become more popular.
Figma started to stabilize in the second half of the month after Citigroup initiated coverage with a buy rating and a price target of $36. The bank's channel checks showed strong AI traction for Figma, including seat upgrades, which should pay off in the coming quarters.
The company also held its annual global design conference, Config, toward the end of June. It made several announcements, including allowing code to be layered into Figma and to convert from the design layer to the code layer and back.
Some analysts gave positive commentary on the stock following the conference, but it wasn't enough to give it a significant lift.
Image source: Getty Images.
What's next for Figma
Figma has bounced back in July, recouping more than half of its losses from June through July 7. The company benefited from another buy rating, and as investors seem to be rotating from chip stocks back to software stocks over concerns that the chip sector has run too hot.
We won't get another update from Figma until August, but if the company can keep delivering revenue growth around 40%, the stock should eventually bounce higher.
